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Fallen angels

The fall of star fund manager Neil Woodford highlighted huge industry flaws that left investors high and dry. Dave Baxter reports on a scandal and its consequences
Fallen angels

Loyalty can come with hefty rewards. In the past decade alone, investors who backed the winners of the day – from big tech to the broader US equity market – have made substantial gains by simply continuing to do so. This extends to some of the UK’s most popular active fund managers: Terry Smith and Nick Train are just two names that have made loyal supporters substantially better off over the years.

But any support for the darlings of active management comes with strings attached: much of it is predicated on the idea that investors can get out of a fund as easily as they got in if things go awry.

Nearly six months on from the suspension of the Woodford Equity Income fund, private investors who stuck with the UK’s best-known active manager are counting the cost of their loyalty – even now it still remains uncertain how much money will be recovered once the flagship fund starts winding up in 2020. The Woodford affair has cast a huge shadow over the investment industry, raising questions about trust, transparency and regulation. But it’s an episode that could also help the industry, and investors themselves, avoid future mistakes.

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